Monday, June 23, 2014

Coming to the end of my break, feeling a little distressed and yet excited about the change in my working environment. I was shopping at popular (not vested) for my office supplies, as I no longer have close colleagues in my new workplace where I could borrow stuff from... Hehehe I know I cheapo, but I return when I remembered.

Since I was vested in venture, I can't help by looking at which POS retailers are using. Today, I looked up and saw the cashiers counting money and trying to clear the sales as quickly as possible.

Then a question come to mind: how much does these cashiers earn? How much does the boss of popular earn? In a capitalism world, money is the title. Although u are not above law, if u are rich enough, you are almost above everything else.

I always wonder why are construction workers so badly paid? They work their shit out, endure the sun and dangers of the workplace, and most probably earn less than half of my pay?

We always heard the term, higher value job, from labour intensive jobs to capital intensive to the latest knowledge intensive job. It is believed the higher you go up the food chain, oops value chain, actually food chain is correct, the lesser the people who can do that job, and hence better pay. I actually think it is quite bullshit.

IMHO, it is opportunities. Give those blagandesh a formal education, they will be more hungry in the moving up of food chain than you or me. What create this opportunities are actually the elite of the elites, those in the government, and whether they are good enough in playing the game of capitalism to the benefits of its people.Some play the game of capitalism well, but only to fatten themselves. Next time you feel like wacking our government, think of other countries, and with your hand on your heart, ask if our government try to filter down that benefits. That the benefits filter down unevenly is also the food chain effect, but as far as I can see it, the filtering down of benefits are not too bad.

For those higher up in the food chain, they could be earning millions monthly or yearly, your dream house is what they can pay off in 1 year, sickening isn't it.

We learn to invest or at least I learn to invest, to try to move up the food chain. Globalization cause the food chain to expand, and now it is a much bigger Eco-system where bigger sharks appear and smaller ikan bilis appear to serve that chain.

Hmm... Another system perhaps? Socialism I heard? Do you know that our leaders have socialist leaning too? You might be shocked, but workfare, CPF, 10 years compulsory education are some to start with.

Oh that is a warped socialism. Those of you who watch matrix might recall the engineer telling "the one" he first create a perfect world but the perfect world system crash because humans are not perfect.

Is there a lesser evil? I guess not. I used to think that the higher value job pay better because it did the job of 10, and hence get the pay of 5 into 1 but made 9 jobs obsolete.

I now have a different take, the higher value job make 9 obsolete, but if the higher up know how to play the capitalism rules well, it could take on a new Eco-system and create 3-4 lower jobs that pay better in net effect the 9 jobs lost. But hey, it would mean another 5 jobs are still lost!

The sad fact is, if you dun move up the food chain, u will get eaten sooner or later.

But be happy, food chain are usually in a circle. Your boss pay you peanuts, you as a consumer become a group known as client that your boss need to pander to.

I remember one of my colleague complaining about sudden change in work schedule. He was lamenting:" who complain about the schedule?" I told him in the face:" do u really think if it is us complaining, the management will take any actions?" He smiled and replied:"ya huh". It is sad but the truth, before the work schedule come into force, I already told my colleague to emphasized some of the issues in the schedule, I told her specifically:" let her know about this, I think both staff and customers will be up in arms if they see this." My friend told my boss, her response is :"ok what". See? The food chain effect at work, it takes a client email to get the ass of the management working again and cause a big earthquake to the schedule affecting everyone.

I even ask my friend jokingly:" what can be lower than A piece of shit in the food chain?" My friends are a bit stunt before I replied:" us! Because we need to clean up other people mess."

When my wife complained about some issue at work, my reaction is:" Are you close to the customers? Get them to email the management." Of course, there are enlightened ones, who understand we must also respect our food. But most bosses I work with don't understand it, it need the higher up in the food chain to knock some senses.

Wednesday, June 18, 2014

I told my family, let's not go overseas this time, just chill in Singapore. I realized Singapore can be quite fun, and I can save on lodging and air-ticket.

I brought both parents, (in-law, and mine), out. My parents to the SEA aquarium, and my in-laws to night safari. Brought my kid and niece to Singapore Zoo, Singapore Flyer. Catch movies with my wife, and kid. I still have time to attend investment seminar and do a lot of company prospecting.

Actually, I don't understand why the craze to go overseas for a holiday. Isn't this just great, I have plenty of time to monitor the market, read and go Jalan Jalan.

I find Singapore beautiful, the Marina Bay area is no less stunning at night compared to the Bund at Shanghai. The weather is too humid for comfort, that is the only grouse.

I went shopping at the newly opened westgate (Ok, not that new), like that place a lot. Plenty of cafes and eateries, having a tea and reading a book is just cool.

Parkson is only listed from end 2011, these are the numbers available.

Retail business is highly competitive. Parkson is a well known brand, I have been to Parkson in Vietnam and Malaysia.

One thing that stand out very clearly, is the clarity of growth drivers. From organic SSSG (same store sale growth) to opening of new stores.

How did it appear in my screening. It is at 52 week low, a 50% fall from its peak. AT 86 cents now, it is actually at historical low, no matter how short the history is (2 plus years)

It is not difficult to understand why, Parkson is positioned to be a strong grower, and command a PE of 25 at its peak, when the growth did not materialize, it is no wonder it will fall from the top. From the risk section of the prospectus, it is said that new stores usually take 2 years to turn into profitable units. And such, prepare for more short term pains, since there is a steady opening of new stores.

Also besides, Indonesia, Malaysia and Vietnam are registering flat or negative SSSG.

I however, found it rather puzzling in a few areas. As I mentioned, the stock price is in a free fall, especially when the recent Q3 fail to inspire.

But Vietnam is stabilizing for the past few quarters, Sri-Lanka is doing well, the 3 temporary closures of Malaysia Stores has reopened. Indonesia have 2 stores that are newly opened, with more in the pipeline. Has market went from over optimistic to pessimistic? Also, the operating numbers are further aggravated by currency weaknesses in Malaysia and Indonesia etc.

I took a look at China Baihui which is also listed in SGX, the numbers are world apart, there isn't even stability of profits, I do not want to go into valuation. Also, Parkson is a more established brand.

Then I look at business, the parent company and key personals hold the majority of stake in Parkson Asia Retail, they did not pay themselves options, remmuration seem fair.

From a negligible dividend of 1%, yield has become a more acceptable 3% with the fall in price.They aim to declare 40-50% of profits as dividends, although there is no fix dividend policy. But given the parent company hold the bulk of the shares, it is very unlikely that do not want dividends to flow back. In fact, they gave a special 3 cents dividend in Q3, and according to CIMB research is open to the idea of 100% payout in current year.

Another reason why the company is not doing well, could be its parents company is facing headwinds too.

But Parkson is a net cash company with 24 cents per shares, assume the same poor Q3 results for Q4, highly unlikely, PE for 2014 will be 15. Low for a cash generating, asset-light business (Main revenue from concessionary sales) with a strong brand name. If you take away the cash, PE is around 10.

Market is assuming Parkson will be a negative growth company in the future. A flat growth will make it fairly valued. A negative growth over-valued.

Looking at factors that could have affect sales, one of it could be the MH370 incident, affecting Chinese tourists. I felt that is one off incident.

I think Indonesia and Sri Lanka could offset Vietnam, and Malaysia could managed flat growth in the short term, and in the longer term, the consumer story has not changed. If Company goes into a depression with a weaker than Q4 results, I would accumulate more.

Monday, June 16, 2014

When I first get into university, I worked very hard. Who wouldn't, the difference in starting pay for one with honors and one without is about 5 hundred per month.

I remembered having the most notes, researching the most, memorizing the most, I read through my notes that is thicker than a dictionary so many times that I can remember most of the pointers, even the sentences. So how did I do for my first semester? Straights Cs.

Disappointed, I decided that I didn't understand the new module enough, I worked even harder, telling myself it is just 1 semester. The first year results, still straight Cs.

The second year, I work even harder, sleep less than 5 hours, wake up early to study, and eat, shit, study again. Sleep the study. Well, I got 1-2 Bs, but the rest are Cs.

I was devastated. I resigned myself to a degree with pass or merit. For the last semester of year 2, I decided to chill, work hard so that I know what the teacher is trying to teach, but I never burn the midnight oil anymore. I spent a but more time jogging and playing computer games. Surprise surprise, I score my first A!

Suddenly, it dawned on me that I might have overstudy. I read through the notes so many times that I have difficulty answering the qn directly.

It sound real stupid, but it is true. I remember the wuxia novel I read, the highest skill is to forget u had the skills.

I continue to work hard, but nearer the exam dates, I forced myself never to study. So that all that I have read, I will not remember which source it came from, I will not remember how the sentence is structured. I also make sure after I understand, after I practice once, I will not touch the notes again.

I got straight As.

In case u think I am boasting, I am not, but can't help it if u think that way.

Looking at back, I realised those stupid 1st year was not in vain, as it formed the foundation of what I learned later, I can relate to a lot of concepts and transfer concepts easily.

Looking at my investment life. I lack the mugging of the 1st year. My radar of companies too small, I understand too little industries, I read too little annual reports. Without the mugging, how to find the gem?

As for forgetting everything to remember everything. One has to forget the value of your portfolio to be able to invest emotionlessly, so that u can focus on the Path to your end goal and not get distracted.

I did get to honors class. I was thrilled. I think: how about second upper or even 1st class? My anxiety and greed cause me to make my first year mistake, I over. Prepared. Of course, given I am now seasoned in the exam game, I got Bs. I curse myself, why did I over prepare? The last semester, it was straight As again.

In investing, it is when u think u found the formula, then u will fumble again. I will keep learning. I think I will make it a point to read AR every night.

Sunday, June 15, 2014

I am a slow thinker. I need time to connect dots. I felt very compelled to write again. Invest X congress has provide the spark for me to reconnect the thoughts again.

I replied in a comment, that the level of enlightenment and excitement is no lower than the time I lay my hands in "the intelligent investor", a watershed moment in investing.

I have a few nagging questions that have been answered, and I wish to crystallize my thoughts before they are gone again.

Q1) how much to keep for war chest?Q2) why it so darn hard for me to keep my hands off the market when I am sitting on cash?Q3) what is my plan for multiple market cycles?

I have high expenses, I cannot just say cut then cut, I need to convince my wife and my in-laws that overseas trips are a waste of money. I am more or less resigned to the fact that I will work till I die.

I have a portfolio of 50k, including cash idling now. What to do with it?

To answer q2) the end goal is really important. I want 400k by 60, so that my passive income can be 2k per month. I know many of u have 400k now, and is already laughing. Is ok. I just want to lead my life my way. I know I can keep the 50K port active. It is a minimum port, if anytime I exited a counter and it fall below that level, and I find another value proposition, I can just go for it again, there is no need to wait for a correction. There is no need to worry about inflation, as the core of returns of 5-6% through dividends should allow compounding of reinvestment. When I see the end goal clearly, there is less urge to buy that counter that will be gone tomorrow. The decision of what and when to buy, how much to buy become clear. It is so much easier to keep my hand off or on the market now, with the plan clear and sound in my head. The plan may works or not works, but without one, u don't even know it doesn't work

The most important criteria is dividends. Other things work too. But my core 50k should be all income generating, preferably between 4-6%. The next important criteria is it must withstand stress tests, balance sheet strength is a must! Ability to bounce back is a must too.

Will re look my counters again. I still believe in diversification. My circle of competence must be spent on preventing blown ups that have no chance of recovery.

Q1) how much to keep as warchest? As much as possible. Assume 6% return for 50k compounding, I just need to feed 3k plus for the next few years. These are the amount I can actively buy whenever I find value proposition that fit my criteria. The rest of the money will be tuck away as opportunity fund, and to strengthen emergency fund. When opp fund almost equal to port size, can consider increasing port size. Otherwise, the port size increase will come strictly from dividends. That would set my mind at peace with any emergency or market correction.

When market correct 5-15%, opp fund can be dipped into, but by no more than 30%.

When market correct 15% to 25% another 40% can be used.

If crash of beyond 30%, the reminder can be used.

How about super bear of more than 50%? I think it will be blood all over the street, CPF OA to pick blue chips should be fine.

Does aggressive growth counters has a place in my port?? Well, if opp fund is almost as big as port, I think some money for adventure is fine. But like what AK says, it is a small part.

Counters that give good dividends but not "AA" rated by my own benchmark should be constantly monitored and should not cover more than 10% of port.

Cigar puff counters, with viability of only 2-3 years should be traded off with good profits unless visibility improve.

Area of improvement:1) bigger radar of companies 2) qualitative comparison of companies

Saturday, June 14, 2014

When I was invited to the Invest X congress and do a review on the event, my first reaction was:” Wow, do I get free admission?” Kenji laughed and replied: “Yes”. After the whole event, I was a bit loss of what to write, as I was “paid” to do this review, I thought I should put in some serious thoughts and efforts in this review. I ponder on what to write, in the end, I guess they invited me for my candid view, so here goes, hope my candid views do not offend or disappoint anyone. View expressed are purely my personal.The first thing I did when I reached the place was to scan the profile of the audience. It was 80% male, age group range from late twenties to perhaps early sixties. The majority should be in the forties. When the speakers were speaking, I keep observing the audience, from their body language and actions, I could guess the audience has very varying prior financial knowledge. Some folded their arms and listen, some just nod their heads in approval, and some were frantically taking photos and copying notes of some rather basic knowledge. As such, I guess it is very difficult to pitch the whole seminar at the right level, but the organisers did well, in the sense they have a little something for everyone.The first speaker, Victor, did an introduction of his investment quadrant, made up of 4 components: Numbers, Valuation, Business and Management. He also did a practical on how he apply his investment quadrant in his stock selection. The quadrant is nothing new, the concept can be easily found in investment books, but Victor took pains to explain the concepts slowly. The framework was later used by the last speaker Rusmin too.Numbers and Valuation are the easy part, just google it, and you will find what you need. In the case study, Victor show how he looked at peers from the same sector, and ask why they did badly, what are the mistakes made. He then show how his choice of company, could escape the fate of his competitors/ peers because of the slightly different business model. When I compare competitors, I usually just compare numbers, Revenue, Growth, Margins, ROE, etc. He show a qualitative comparison of business model, which I found highly enlightening. I was a little disappointed when the management part of the analysis did not go beyond remuneration and dividends.Victor did not have very complicated valuation method, he used historical industrial PE range for strong business he identify, and he quantified the growth range that should materialized, and show the potential gains.The next part of the presentation is about fraud detection. I can’t remember the Speaker’s name. Coincidently, I was reading about fraud detection from a book, and I found what the speaker says, overlap quite a bit with the book. “Why fraud takes place? How can fraud or cooking of the accounts be done?” are some of the questions addressed by the speaker. I was getting a bit impatient and was hoping that he tell us how to detect frauds than going through the background knowledge. When I got what I wished for and it blew my mind! The Beneish Model to detect funny accounting business looks like university Mathematics. I really feel like I am taking exams again. True to be told, I only understand 30% of what is said, it really is quite technical. But well, guess, they have a little something for everyone, for the advanced investors. But I think that model is really a bit over the head for most people. I though some simpler ways of red flags detection would be good, or if they really want to show that model, show us how to insert the various variables from the financial report into the equation, would help me remembered better. If Tok from The Aggregate Value Fund, the following speaker, claim he cannot understand it too, I guess less than 10% of the audience get it.After lunch, we had Tok from The Aggregate Value Fund sharing with us. The initial part of it was rather repetitive, as it already appeared in the papers, but I guess a refresher is good for everyone. Given that Tok needs to pitch it in such a way that it does not sound like canvassing for funds or trumpeting his funds’ performance, he did a very good job in introducing the concept of withdrawal rate for retirement. The figures used by him were mind-boggling for me. He used 10K per month for retirement, and show how it is achievable with compounding interest of 12% and the number of years and initial capital needed. Frankly, I was a bit demoralized, and I thought I can’t never attain the level. But, just for fun, I used a 2K per month withdrawal rate for retirement, and I think I can get at least 1K from CPF annuity. 3K per month do not seem comfortable, but I guess I need not go hungry. Assume 6% return, I need at least 400K at the point of my retirement. I did not use his 12% return, but a 6% return, something I think I can achieve. I am surprised that assume I do not add on anything to my portfolio of 50K now, with compounding effect, my 50K should become 200K in 24 years’ time, and before I turn 59, several of my endowment policies would have matured giving me another 150K to invest. Hmm.. Look likes my future is not that dark after all, if I stick to the compounding effect and do not get distracted so easily. I am also quite sure, I will be able to add to my portfolio as my savings grow. That talk in particular, really set me thinking since I invest mainly for retirement, and it answered many of my internal questions of how much to keep for warchest, when and what to invest and divest.​After Tok, we have our most entertaining segment of the show, AK’s segment. I think AK’s presence is not so much intellectual than inspirational. During the toilet break, I heard one participant telling his friend that knowing someone who is just like him make it is really motivating. Hey AK, pardon my candidness, but I agree with you when you say:” readers of my blog, you can go for your extended toilet break now, as what I am going to say now, you would have read it anyway.” I thought you could zoom into the inspirational part, how you cope with your lifestyle, how discipline made it work, etc. As I said, I think the audiences has varying prior financial knowledge, and you did not emphasized on the risks of reits investing. (Capital loss, Dilution, refinancing risk and interest rate sensitive), I was a bit worried when the lady beside me jolt down “invest in Reits”, “rental income”, but missed the most important, yet funny part of “take a look when there is blood on the street”.​The last speaker,Rusmin, talk about the importance of recurring revenue and predictability in business model. The counter he shared is interesting, beside the quadrant, he also emphasized growth, moat and risks. Just find the businessmen quote in his example unscrupulous. But this is just my personal view. ​In conclusion, it is worthwhile day spent. It is value for money. If I could give my 2 cents worth, I think the concept of risk can be further emphasized. Also, they could be a theme stringing out the whole talk. Perhaps, “anyone can build a comfortable next egg” is one such possible theme. Start off with Kong, talk about how attainable is that 12% since most of you did it. Show how even with 6% compounded over time, it work magic. Used that to emphasised discipline, risk management and stock selection skills. The discipline part, can be covered by AK, a living example of “I can do it, so can you”, Victor can share about his skills of stock selection and business analysis. Thereafter, preventing complacency in pursuing growth, be wary of the “golden boy” of stock market, when everything is too good to be true, check for fraud (That is when the HSBC guy can come in). I think with a theme and better coordinating and sequencing of the various speakers, the sum of its parts can be greater than the total.​Lastly, this is my personal opinion only, do not throw eggs at me, or hack my blog, with message like “AK forever, down with Sillyinvestor”

Thursday, June 12, 2014

I was reading the winning habits of warren and soros. Rather disappoint, but it sets me thinking.

Do note that I do not question the wisdom of these legendary great, I question my own understanding of them. So here goes:

Circle of competence.How long have u been seriously investing? Few years? A decade? Do u have a circle of competence to start with? I know I don't, I am still experimenting and learning. I have tried recovery plays concept, dividend play concept, value-investing concept. I am no master in any of them, so should I stick to any defined circle? I think not. Staying in that circle, will cause me running in a circle, not circle of competence. But I do know my circle of incompetence. 1) Penny trading. 2) trading in gnerally. 3) TA 4) investing based solely on numbers and ratios

Be greedy while others are fearful.Well, u have to be very careful when applying the above. U could be catching falling knife and be stupid when others are fearful. I thought I am greedy when others are fearful of s-chips, I am actually stupid. Thanks goodness, the heavy loss of s chips are offset by decent win too. I never brush off schip. I was vested inYZJ till recently, I wil buy back if the price is right. Just have to know that we are dealing with s-chip, even alpha s- chip with solid dividend records must be seen differently from others.

The most dangerous words are "this time is different".Someone just slap me with these 4 words when I posted in a forum about Venture. I replied another forummer who is skeptical about its recovery, I explained my thoughts and another forummer slap me with this famous quote without explaining the details why is it not different. Hmm... If it always not different, then what is there to invest?

Diversification vs concentrationMany legends "hood" big big in several concentrated plays and scorn at diversification. Buffet, Soros etc. u have to ask yourself if u have a circle of competence to start with before u try concentration strategy. In the boxing ring of Mr Market, some of these legends know how to wait for a knock out blow. I am happy to survive and learn to take snipe at him first. If I "hood" big time and I missed my footing, and think the knockout punch will be on my face instead!

Never follow others blindly.The key word is blindly, not never follow others. If u do your research blindly, follow your own gut feel, u will not be any better off. Do your due diligence, but if u know someone has done his due diligence, and u did yours but checking on his work, because he has a more robust framework of analysis, why the problem of following smartly? Our ego should not stand in our way, if we recognize someone superior, just dun follow blindly, and check your own ammo level and risk appetite to decide to follow or not.

My conclusion:To rephrase Graham words, since I cannot remember his actual words. U are right not because many agree that u are right, u are right because of facts and research. My take: I am only partially right when I exited with profits. I am totally right only when I made net gains beating inflation or whatever targets u have,nice CAGR for years to my coffin or senile. Yes, u can only be totally right when u stop investing totally, most likely because death do us apart. LOL

I keyed in criterias: Companies that showed lower earnings, but gave some dividends. I will then see if I would like to read up more.

GP industries stand out

It has a yield of more than 6%. Earnings is poor due to exception write down. But what really caught my interest is the structure of the business. GP industries is 81% owned by gold peak industries, a company listed in HK. GP industries in turn own a 49% stake of GP batteries. There is constant shares buyback. Just 5%, and the minimum public flow will be less than 15%. Isn’t it very obvious that a GO is on the cards? Especially since the parent company Gold Peak Industries has GP industries as the sole company, why not save on the listing fees?

All the companies are in net debt position, but debt has been low in term of net debt to equity ratio. It was loss-making last year. But if you look cash flow, both GP batteries and GP industries and doing quite well, and that explain why they can continue to pay good dividends.

Hmmm…A privatization play with decent dividends and low debt. GP batteries, hmm, I know that brand too, business is rather easy to understand. Then the Drama starts.

I read valuebuddies for input, GP batteries go for a rights issue recently, when they have a lot of cash and just exited a loss-making venture. Hmm… why? "Hey, maybe to push down the price!" I thought. Maybe the discount of rights might put a stress on the stock price, also if not all wanted the rights they can subscribe the excess rights cheap. Given that GP industries own half of GP batteries, they need to fork out a fair amount of money too. All the rights were fully subscribed, excess rights subscribed too.

Both GP are traded at a discount to their NAV, so a GO is not impossible in terms of valuation too.

The rights issue makes me uneasy, then I read the VP committed suicide at their HK building! What the… the reason cited is work-related stress? Huh? I mean, there are dozens of loss-making companies, many have much weaker balance sheet. What the…

Saturday, June 7, 2014

I read with shock and disappointment the protests at HongLin. I understand their grouses, knew the flaws of the system, but the placards and messages on them are outright ungracious.

The main bug, the high minimum sum. The system benefits everyone disproportionally. The middle income whose CPF is not dump on property, should have a amount in excess of minimum sum and has a fat life plan, thus this group should be contented with it.

Those not able to meet the minimum sum should still be better off, given That 90% of Singaporeans own a property, and hence could pledge that property. Assuming they don't die in the early 70s, they should be better off than if they are allowed to take out all their CPF money.

Why then the amount of angst?

1) trust, and connection. Cold hard cash is always easier to understand than projection of returns.

Shifting of goalpole further erode trust. Minimum sum need to account for inflation, and minimum sum is raise several times from 30000 to 80000 and then to 120k in 2003 dollars. Even I feel uncomfortable about that. The fact that the powerful PAP can changes the rules easily, although for the greater good and with valid reasons is scant comfort to the lower-income earners.

Personally, I feel the issue is not so much the merits or lack of the system, but the lack of connection and respect of people's money.

First, acknowledge the system benefits the poorer less. Forget about the rebates in property etc. payout more in cash when they turn 55 for the lower income, top up by government.

Allow CPF interest free loan for those unemployed after a period of time say 1 year. Allow half of last drawn pay subjected to a cap, this could act as unemployment insurance for 6-12 months. When they find their job, they can return the debt with the govt and worker co- repaying it over a longer. Period of 5 -10 years. The debt limit can be set to prevent abuse.

Let people see cold hard cash is a good start to establish trust.

Lastly, next time a change is going to be made to CPF, no matter how well intended, allow a longer gestation period, and prepare to watered down the changes. If Ex PM Goh can says employer's contribution reduced to 10% just by informing parliament, it is scary. Any changes to CPF, should allow whip to be lifted in parliament, robust debate and concerns addressed before moving on. Not just Maths and number, but people angst and distrust. Respect people savings.

Friday, June 6, 2014

When I first started, it is for advertisement fees. Later, that reason disappeared.

Now the what. When I blogged random thought series, I just speaking my mind, hope to find some like- minded people, get some comments, get some discussion. It is really a telecast of talking to myself, which I enjoyed, but rather difficult to make it to friends' conversation.

The second part of what and when. When I blogged about companies, initially, I wanted affirmations, discussion of companies, blind spots, and also so call spread the wealth. I huat people also huat.

Now when I blogged about companies, I know there are usually very little comments, so discussion on companies might be better served as valuebuddies forum. As for sharing of info, so that other can huat, I know I don't have a good record, people who huat under me would most probably lose their pants too. Following bloggers call is a dumb thing isn't it.

The final when, recently, I am very clear. Writing about a company is a very effective way of consolidating my thoughts, and crystallization the stance, it is still a compelling buy or wait and see? I also want to see if my blog has a influence on stock price, hahaha, I it would have impact just like an analyst report.

Finally, blogging is a way to escape boredom. Go party? Hmm.. What's that next counter that I am interested in...

Thursday, June 5, 2014

This time round, I look at Venture competitors, mainly Jaibil, Plexus, and Benchmark electronics.

First, I wanted to know if competitors are doing brisk business when Venture is floundering. Generally, all 3 competitors have revenue that are generally increasing or stable over the last 5 years.

Next, margins.

Venture has the best net margin of sub 6%, over the last five years. The three competitors have margins of 2-4% over the last five years. Jaibil is the biggest, with almost 18 billion of revenue, but margin is also the lowest, this is partly due to the it having 3 business segments,within the EMS. In terms of margin, Venture wins. But given the competition of the sector, the niche of design most be accompanied by costs, otherwise, there is no need to outsource the manufacturing by the customers. So lofty margins are unrealistic. With better revenue and scale, Venture margin might improve, but I think it would be a tall order to expect it to return to 7%.

Next, ROA, ROE.

With the exception of jabil, the others are in netcash position, and Venture, Benchmark, and Plexus both have rather similar ROE; 7.7%-10.3% ; 8.7%-15%; 4.9%-9%

I would say Venture is comparable to both, but Plexus does stand out quite strongly.

FCF

Almost all 4 companies has strong FCF capability. In terms of FCF/rev;

Venture is most volatile over the past 5 years, from 1% to 9%, Plexus is stable at around 4%, excluding a year of negative FCF, Benchmark is around 2-4%, with 2 years of negative FCF

Well, Plexus again stand out, but Venture has only 1 year of negative FCF in the 13 years of history

Let look at DCF(10 years.. ), one of the valuation tool:

Apply 3% growth and 9% discount with 20% MOS (IF you believe they are comparables, I do, comparable rev, ROE, ROA and margin)

Current price premium over DCF price:

Venture=5.5%

Plexus =281%

Benchmark= 83%

For Benchmark to justify current price, they need discount rate of 6% and growth 3%, and Plexus need even more lofty assumption.

PE valuation over the past 5 years.

Venture= 7.7-18.9

Plexus = 8.6-22.5

Benchmark= 7.9-21

Again comparable.

Dividend Yield (from Maybank research)

Jabil=2%

Plexus and Benchmark= 0%

Many of the industry the customers of the 4 companies are in overlapped. Network/comm, industry, life/medical science, computer etc.

Venture, is the only one with significant number of customers from the printing and imaging segment. The one that is dragging Venture down, but also the one with promise of rebound due to the growth of 3D printing.

POS customers doing well, Oclare should ramp up production soon, lifescience sector has shown across the board growth, Jabil, Plexus, Benchmark all register positive growth from this segment. Printing will show short term pains but longer term growth.

3) Competitors

Not actually a mickey mouse when compared with their global cousins. Only losing part is declining revenue when peers are holding up well. But Venture outlook is improving. In terms of valuation, 2 out of three, in terms of dividends yield and DCF, show cheaper valuation. In terms of PE, comparable. Other comparable like ROE, ROA, margins etc are ok.

Venture should return with a vengeance? I don't know. I decided not to wait anymore. The next few quarter could be lumpy due to tax rebate issue, but revenue and gross profits should show QoQ improvement. Watch those numbers.

Tuesday, June 3, 2014

My colleague send me this link, and wanted us to see the creativity behind it. He ask us to think why would coke do something like this is remotely related to the business.

Another colleague's response: its a CSR exercise- Coporate social responsibility.

I am worse. It's a marketing exercise to build up the brand. Relating the experience of happiness to coke. Not unlike what Disney, Starbucks and macdonald are trying to achieve with their advertisement. I agree the marketing and CSR exercise is done very creativity and meaningfully, but I think the underlying motive is still profits.

Cold? I think I am cold too. For those whose first thoughts are " so sweet, so touching", let me piss you off further of what I thought when I saw the first video.

A bottle cap for 3 min of overseas call? A coke cost perhaps $1. If so many are Calling, it could only mean 2 things:

1) the telephone booth is there only for a short period of time, after the exercise is over, it will be removed. (But better than nothing)

2) Maybe it can be cheaper than a bottle of coke, that means the telcos are charging an super super high rate for broadband or whatever line to connect people.

My apologies. Investing might have made me a little... Can't find the adjective. What's your first thoughts? Same as mine? Totally different? Would like to hear from u.

Sunday, June 1, 2014

A reader asked me to elaborate about YZJ HTM. I am quite sure Ren every HTM is different, but maybe I can shed some light on this Tianjin GuoHeng event.

Tianjin GuoHeng ex-controlling shareholder, lets call it A. Owned B money, and pledge its shares to B. A is supposed to transfer the shares to B, or any company B appoint. B appoint YZJ to take over the shares. The shares are like collateral for a loan. A is supposed to pay YZJ interest and will redeem the shares in 1 year, failing which, the shares will belong to YZJ. Since A pledge to buy back the shares in a year time, YZJ promised to, in the meantime, pass an attorney of management rights to A, subject to various terms and conditions so that the shares remain of value.

Once this agreement is in forced, and shares are transferred, B is out of the picture. Ren then add another layer to this agreement, the shares is bought over from B using Ren investment co, C. YZJ then provide the HTM service to C, in the form of loans with interest for C to buy the shares.

Why bother to add that additional level? I speculate, after chatting with city farmer from valuebuddies, (my own understanding, might not be what he thinks ) is YZJ is still Ren biggest baby, with the shipbuilding business being its lifeline of cash generation. So it is highly unlikely that C, which is also under Ren to default. If C did not receive interest from A, it will then proceed to recover its collaterals and in the meantime, the YZJ HtM can roll over it, without declaring a default. Also, given now that A has sue Ren, the buck can stop at Ren and C, without affecting the shipbuilding business.

I wonder if all these make sense. If there are readers who are able to point out mistakes or misconception, please do so, and share your knowledge so that everyone learn.